Peak Swipe: Why Alexa is Apple’s greatest threat (And how Amazon anti-trust will play out)

Here’s part 3 of 3 of the transcript to this week’s Trading With Cody Live Q&A Conference Call.

Q. I’ve been a subscriber for about 4 or 5 years and I love the site! I wanted to know what your opinion was on Apple? I have always enjoyed if you would be a buyer or a seller before earnings. Your year-end prediction of Apple last year was spot on. It hit the price target about January this year and I was just curious to see what your opinion on Apple is.

A. Well thank you for being a long-term subscriber and thank you that you remember the price target because I actually saw an article the other day when I was researching that I had written about Apple last summer while the stock was getting killed. Remember last summer, Apple was at one point below $90 and I kept saying they could hit $130 by the end of the year.

I couldn’t believe that it worked out like that. Then I forgot to take a victory lap if I am not mistaken because it was like a month late so I had perhaps moved on in my own mind.

I wrote last week a little bit in the chatroom chat about the expectations in Apple and I was being a little bit tongue and cheek how I phrased it in talking about we should “Fade the fader’s fade.“ We had this whole back and forth that I thought was funny but if you don’t know contrarian investing at all it made no sense to you.

The upshot is this. I, frankly, would rather buy then sell Apple before the earnings report. I think there is a lot of near term negativity about Apple. The big problem with Apple is at this point so widely owned and if there is one of those quarters where people somehow are like “this is the end of the Apple ecosystem!” and you get a 10 percent hit. We have seen those happen before. But I would not think that is the set up right here, right now unless it is an utter disaster of a quarter and I don’t think that is the case.

Even if the next earnings report is a disaster I think people are looking out at the iPhone 8 anyway. I don’t know that this earnings report matters very much maybe the next day it will be up or down 1% or 2% based on this actual earnings report maybe 3% would be the biggest move I would expect, but it will be the iPhone 8 and the reception to the iPhone 8. It will be what it looks like and how the world is receiving iPhone 8 and how after 3 or 4 weeks when the analysts start sending out a note that their supply chain analyst looks like Apple sold 32 million instead of 24 million units, or whatever the numbers are. I don’t remember the numbers of what Apple sells each year right now.

I do remember and I have taken several victory laps on the fact that 10 years ago when the iPhone hit that I told everybody that Apple would sell a billion of them in the next 10 years and they did! They crossed the billion mark on the number of iPhones sold.

The single biggest threat to Apple is existential, in that it is not any where near for the next two to four years out — the single biggest threat to Apple is the Amazon Alexa operating system. Amazon’s Alexa is something that in Apple’s worst case scenario has the potential to suddenly, overnight, in the next couple years, make developers stop focusing on developing iPhone apps. Or at least quit focusing on apps in the way they have been. Because you walk into your kitchen and call it up on your Echo Show. You walk into your living room and call it up on your TV in the corner or you call it up in the projector on your wrist or the eyeglasses your wearing with the reflector device on it.

In 2017 the world will spend more than 17 trillion hours on apps. The world will spend at most a few million hours on Alexa devices. But therein lies the idea that Alexa is a great new disruptor. In a couple more years, you might be using the Alexa App on your smartphone to access “skills”, and you will also just be using the Alexa operating system on your television that Samsung sells you.

The fact is we are probably at “Peak Swipe” right now. And we might be at peak iOS operating system in the smartphone world right now.

What we need to watch for is developers. There is an influx of developers right now, including the IAm App, that are building for Alexa.

At my company, The IAm App, we are now actively developing for Alexa. Of course, we are still developing for Apple too. Don’t get me wrong. We have more apps than ever coming out in the next three months for all kinds of celebrities joining the ones we already have in the store, including Jay Leno, Neil Patrick Harris, 50 Cent, Lauren Ash, Carl Reiner, Logan Paul, Sammy Hagar. All told, we have hundreds of new iPhone and Android smartphone apps coming out in the next few months. But we are also going to make sure you can pull the apps up on your Alexa Show or any other device with a screen that Alexa will be running in two years.

The question and potential of an Alexa-centric way of interfacing the web is there even if you are an iPhone user. Though to be sure, it is important to note that is the Alexa Show is built on Android. Which means Google/Android could be a huge beneficiary in what people are going to be accessing on a daily basis. They will be accessing Alexa “Skills” and/or Android-based apps and/or simple Alexa-based apps with voice interactivity, whether it is on their television or refrigerator or Echo Dot because they are talking to Alexa. And some of those skills will require Alexa to pull up an Android-based app.

So we are developing the IAm App for Alexa right now and I am learning a lot about this stuff. So I will know a lot more in coming weeks as we develop this skill for the IAm Apps on the Alexa Show. That is one of the reasons why by doing the IAm App that I benefit as an investor. I benefit from learning these trends and gaining insight and what we are using and who is supplying what. It is all part of it.

“Peak Swipe.” Copyright, Cody Willard 2017! You guys are my witnesses.

Since we’re on the topic of Amazon, let me answer the question I keep being asked about Amazon and anti-trust concerns. What I see happening is with anti-trust concerns and Amazon is this.

The Democrats will pretend they are going to go after Amazon for anti-trust, but it won’t really go anywhere because the Republicans and Democrats haven’t actually been actively anti-trust in decades.

Just last week, Chuck Schumer came out with a “Better Deal Platform” for the Democrats. To be sure, it drives me crazy when any Republican or Democrat like Chuck Schumer who has been in the system for decades says something like “The Republicans/Democrats have lost their way for years.” Well, the Democrats and Republicans have lost their ways for decades and people like that guy are part of the problem.) But the point being, one of the major bullet points that he focused on there (ie, that the propaganda that his PR people put together for him) is all about anti-trust.

Now remember that under Obama the beer companies and any other industry that wanted to and spent enough money lobbying Republicans and Democrats were allowed to roll up their competitors. There is almost a monopoly in beer in this country right now. That happened under Obama administration, under a Democrat administration. Then you read the Democrat’s new “Better Deal” and they are like “we have got to stop these mergers and acquisitions,” and they cite beer companies having been rolled up as an example! You can see why all this just drives me crazy because people are going to vote for these guys that have allowed the beer companies to become a monopoly because they are now propagandizing that they are now against that.

The point being you are going to see the Democrats really focusing on anti-trust and Amazon will be at least somewhat in the cross hairs of that. Since everybody recently has started talking about Amazon and anti-trust, the idea of Amazon and anti-trust is getting out there. And the Democrats and Republicans never have an original thought in their life. They just go with whatever looks like is going to poll better. If it looks like that is going to poll well (and I would think that Amazon anti-trust arguments will poll well — the reason the Democrats put that talking point in their new “better deal” thing is because it polls well) the Democrats are going to at least going to propagandize they are going after Amazon and other monopolistic/oligopolistic/dominant companies. Right now the people in power are the Republicans of course and it doesn’t poll well for them to go after anti-trust arguments. So they are glad to allow Amazon to do what it is going to do.

Finally, don’t forget that Jeff Bezos owns the Washington Post.

So, yeah, I expect there will be a lot of noise around Democrats going after Amazon and companies like it. I don’t think it will get anywhere with Amazon though. And I am going to tell you right now, I hope the stock gets hit for like 20 or 40 percent off worries the government is going to crack down on some sort of anti-trust thing.

If there is one thing we know the Republicans and Democrats do not crack down on anti-trust. So they are going to let them do what they want to do. If the worry and fear gets built into the stock price, man I will take that opportunity to make Amazon my by far biggest position. If I could buy even more Amazon, which I’ve owned for years and at a much lower cost basis than today’s quotes — if I get the chance to buy more Amazon at $750 or 800 bucks in the next six months or year, I will do it. And Trading With Cody subscribers will be the first to know when I strike again. I don’t think I will get that opportunity though.

Why? Because of Alexa. Sure, there’s Amazon Web Services and there’s Amazon retail juggernaut and Amazon music and Prime and TV and movies and…but those are reasons I’ve owned Amazon for years already. The reason to own Amazon for the next five years is because Alexa is set to takeover the world.

Q. This is a thrill to talk to you because I have been a subscriber for years! Since your price target was so spot on with Apple where do you see Apple at the end of the year. Would you see it about where it is right now? Maybe slightly higher or lower?

A. Whoops! Yes, you asked that question early and I forgot to answer it. Let me process it. I am looking at a 5 day, 3 month chart, 5 year chart. You know what is interesting actually is to pull a 15 year chart of Amazon versus Apple. I bought Apple just about 15 years and 3 months ago, I think. Apple is the only stock that I can find that has out performed Amazon in the last 15 years ago. The only major, major cap. If you look over the last 10 years, Amazon has blown away Apple! Alright, for my price target year end. Let me pull out my Carnac the Magnificent skills and say, the answer is if Trump is still in office, up 20% from here.

Q. So a trillion dollar market? Right at a trillion dollar market? It is about at $803 or $804 right now.

A. Maybe, but you have to remember, they will buy back a billion shares in the next 6 months anyway. So call it a $950 billion dollar market cap for my target.

Q. I wouldn’t be surprised if Eddie Cue, Head of Services, leaves the company as well. I don’t think he is doing a great job. I think he is leaving a lot of money on the table.

A. That is a great call. If there is a turnover there and/or in the company, really that is probably the head the might roll and if that happened the stock would top 5 to 10 percent the next day and probably get in breakout mode.

By the way, regarding my “if Trump doesn’t get impeached” caveat there — I was sort of joking. I don’t think Trump is going to get impeached or whatever. I think the Republican/Democrat regime will keep one of their own as long as possible. The Republicans are, again, are somewhat in power so it would be a big hurdle to get him out of office if they were to actually try to do it. Unless, of course, impeaching Trump starts polling well!

Maybe my answer for that should have been, as long as Trump is still in office and/or there is not some other Black Swan it will be up 20%. That is not nearly as clean or Carnac The Magnificent enough answer.

Okay. Anybody have any more questions? This is your last and final chance to ask because I have a Schlotzsky’s sandwich that my wife picked up for me. The Scholtzsky’s here in Ruidoso has been here for 30 years. My mom used to do the books for the local shop. I get the double toasted, small original chips and an Iced Tea with a little bit of Lemonade in it and boy, it is a good lunch! There used to be a Schlotzsky’s, before they went bankrupt, in New York City on 58^th and 6^th. I used to walk up to it from my office on 49^th and get the same exact sandwich that I got here in Ruidoso growing up.

With that, please spread the word about Trading With Cody guys! I will tell you guys. I am working my butt off and it helps to have more subscribers. You guys get more services, etc. over time, as you have seen, because I grow my business and I am able to hire more people to help, etc. In return, I get more research done, etc. So help me grow the business. I haven’t asked for referrals in a while. I like to do it when I am being widely complemented on a conference call or in the chatroom as was the case today, so give me some referrals! I will even throw in, if you are an annual subscriber and your subscription comes due I will refund $100 to you if any of your friends sign up.

Peace, love, and happiness. Thank you all!